Proposed backup power plants set to receive new energy sources
Germany is set to introduce a new capacity mechanism, primarily consisting of auctions for gas-fired power plants, to serve as backup capacity during the coal phase-out and complement renewable energy sources. The Federal Minister of Economics, Katherina Reiche (CDU), aims to tender gas power plants with a total capacity of up to 20 gigawatts as reserves by 2030, with the first auction scheduled by the end of 2025.
The reserve power plants are intended for use during so-called dark doldrums or price peaks on the electricity market. They will step in when electricity generation from renewable energies is insufficient. The costs of this planned capacity mechanism will be covered by a levy, with the financing likely to be recovered from electricity customers through capacity charges embedded in their bills.
However, exact figures for the cost to customers have not been specified in the available data. The EU state aid law requires a "causer-appropriate refinancing," meaning all electricity customers, including consumers and companies, must bear a share of the resulting costs.
Criticisms have been raised regarding the lack of transparency in the implementation of the new levy and capacity mechanism. Michael Kellner, for instance, has expressed concerns about the government's decision to introduce the new levy for funding reserve power plants. Robert Habeck, Katherina Reiche's predecessor, had already considered a capacity market during his tenure.
In addition to the expansion of battery energy storage systems (BESS) in Germany, the capacity mechanism may provide payment not for generated electricity, but for the mere provision of the reserve. The German government's plan for a comprehensive capacity mechanism will follow the tenders of the revised power plant strategy.
Katherina Reiche plans to start the first tenders for the reserve power plants this year, with the aim of ensuring system stability with technologies like phase shifters to control power flow. As the details of the capacity mechanism and the exact cost to customers are finalized, more information is expected to be released.
The capacity mechanism, primarily consisting of auctions for gas-fired power plants, will be used to provide reserve power during dark doldrums or price peaks, serving as a backup during insufficient electricity generation from renewable energies. This new levy, aimed to cover the costs of the mechanism, will be borne by all electricity customers, including consumers and businesses, ensuring a causer-appropriate refinancing as per EU state aid law.
